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Monero (XMR) is one of the pioneering cryptocurrencies on the blockchain market, launched in 2014. It has gained popularity among individuals who prioritize privacy in their transactions. Despite its initial success, Monero has recently seen a decrease in mainstream media coverage and may be perceived as being less active in the blockchain industry.
Monero is a fork of Bytecoin. Its primary objective is to provide anonymity for its users by obscuring the identities of both the sender and the recipient in transactions. This is achieved through the implementation of ring signatures, a cryptographic technique integrated into the Monero blockchain to maintain anonymity.
Ring signatures enable a group of addresses to be combined in a transaction, making it impossible to determine the specific sender among the group. This serves to protect the privacy of the transaction by preventing traceability to a specific individual or wallet.
Due to its emphasis on anonymity, Monero has been associated with illegal activities. This perception has had negative implications for the cryptocurrency's reputation and acceptance.
Monero's characteristics cause people to associate the altcoin with illicit activities. This is because the cryptocurrency has the privacy that many do not. A fitting example of this is Bitcoin (BTC). The crypto created by Satoshi Nakamoto does not have the functionality to perform anonymous transfers in its code.
Bitcoin, as a decentralized cryptocurrency, utilizes a public blockchain, which allows for transparent transactions. Without the use of a privacy mixer, these transactions can be viewed by anyone. As such, it may not be the optimal choice for individuals seeking to conduct illicit financial activities due to its transparency.
But is Monero an ideal choice for illegal activities?
Many claims have been made that Monero's focus on privacy makes it an attractive option for those engaged in illegal activities. In 2019, Germany's Ministry of Finance raised concerns about the use of privacy-oriented cryptocurrencies like Monero for illicit purposes. This led to similar concerns being expressed by governments worldwide, resulting in several cryptocurrency exchanges delisting Monero and other similar altcoins that prioritize user anonymity on their platforms.
It is worth noting that while Monero's focus on privacy may make it an attractive option for illegal activities, it is important to remember that using a centralized exchange with a KYC process eliminates anonymity, regardless of the cryptocurrency being used. Additionally, it is not fair to attribute blame to the technology itself for the actions of individuals who may misuse it.
It is important to remember that human fallibility predates the creation and launch of Monero. While it may be associated with illegal activities, a study by Chainalysis in 2021 found that only a small percentage of all cryptocurrency transaction volume, 2.1%, was used for criminal purposes, decreasing to 0.34% in 2020. Furthermore, the United Nations has estimated that between 2% and 5% of global GDP is used for illicit activities, which are primarily conducted using fiat currency.
It is worth noting that while Monero's privacy-centric features may be utilized for money laundering or other illegal activities, it is not the intended purpose of the cryptocurrency. Monero was created with the aim of providing individuals with the right to freedom and security.
Monero is not doing well, but it is not dead
On the downside, Monero's trading volume is low compared to other cryptocurrencies, despite its position as the 27th largest cryptocurrency by market capitalization. Additionally, smaller capitalization altcoins tend to have higher trading volumes. Furthermore, Monero's social media activity is also relatively low, which could be viewed as a negative indicator for the cryptocurrency market, which typically requires constant innovation and development.
On the positive side, despite facing competition from newer cryptocurrencies such as decentralized finance (DeFi) tokens, non-fungible tokens (NFTs), and Layer 2 solutions, Monero's unique feature of anonymity still positions it well on the market. Furthermore, Monero reached its all time high in 2021, unlike other cryptocurrencies such as Bitcoin Cash and EOS, which have failed to surpass their previous ATH. Additionally, Monero has experienced less value depreciation from its ATH when compared to other altcoins.